Treasury's OIG Reports FinCEN Must do More to Ensure Proper SAR Filing

WASHINGTON-Due to a lack of adequate response to a previous report, Treasury's Office of Inspector General said that it delved further into the problems with the Financial Crimes Enforcement Network's monitoring of data quality problems for suspicious activity reports. "What progress had been made in addressing our prior report consisted largely of additional outreach with financial institutions as to the proper filing of SARs," Treasury's OIG stated in its report. "Little if any progress had been made to enhance internal controls to detect and prevent SARs with data quality problems from being entered onto the automated data system." Because FinCEN, a bureau of Treasury, has failed to properly monitor SAR data quality problems in OIG's eyes, the office studied 406 SARs filed by depository institutions and money services businesses over one year to look deeper into the problem for solutions. Under the Bank Secrecy Act, financial institutions, including credit unions, must file suspicious activity reports under certain circumstances to inform law enforcement of possible problems. However, completion and consistency have been an issue. Of the 406 SARs studied, 251 or 62% had one or more data quality problems-missing, incomplete, inappropriate, and/or inconsistent information-in fields considered "critical" by law enforcement. From this sampling, OIG extrapolated that between 227,000 and 267,000 of the 416,000 SARs filed during the audit period had similar errors. These errors did not include those associated with duplicate SARS filed. Observations of OIG included: * Though MSBs had more data quality problems than depository institutions, both had rates in excess of 55%. * Electronic SARs were not more accurate than paper-based SARS. * The most frequent data quality problem was missing data that law enforcement would use to identify someone. * A common MSB SAR problem was lack of or inadequate narrative description. Problem SARs also took longer to enter the automated data system than proper SAR filings, OIG found. The full report is available at http://www.treas.gov/inspector-general/audit-reports/2005/by-date.shtml listed under March 23. -scooke@cutimes.com